The strict know-your-customer (KYC)rules of Reserve Bank of India (RBI) are affecting digital wallets in India as the February-end deadline approaches for them to complete full KYC verification for all their users.
Only a very low percentage of users have submitted their KYC details to digital wallet companies. If the companies fail to provide all the necessary KYC details before the deadline, RBI will initiate proceedings against them.
“If these norms are implemented in full force, the entire industry, which handled around 12,000-crore worth of transactions in December, will be facing a major crisis,” said an industry expert who works closely with a digital wallet company.
RBI introduced stringent KYC rules last year for digital wallets or prepaid payment instruments, making the revised guidelines mandatory for even semi-closed wallets in which users cannot load more than ₹10,000 a month.
The industry representatives have already communicated their grievances to RBI in a meeting on Tuesday. However, RBI is yet to give a clear picture of the scenario. If it proceeds with the law, most of the digital wallets will see a massive drop in their customer base.
“RBI wants more offline merchant payments to be driven by the industry. Hence, they are opening up interoperability (among digital wallets) but they will allow this only when our customer base is fully verified to reduce chances of fraud,” said a representative of a digital wallet company.
Many companies have now started to diversify their domain to other businesses in payment space as a standalone digital wallet model is highly challenging and risky.